House Republicans' Official Proposal: Privatize Medicare

If anything will make it easier for House conservatives to back off on shutting down the government this week, it's the prospect of a different, and much larger fight over the federally funded social safety net. House Republicans are preparing to introduce a 10-year budget Tuesday that will eliminate Medicare and replace it with a private insurance system that closely resembles the new health care law, and end Medicaid as an entitlement program all together.

This plan, which also will include major restructuring of the tax code and cap discretionary spending, will reduce the deficit by over $4 trillion in 10 years, according to House Budget Committee Chairman Paul Ryan.

Here's what this means if you're elderly, disabled, or poor.

Low-income Medicaid beneficiaries will lose their guaranteed benefits altogether. Currently, Medicaid is jointly financed by the federal government and states, which are required to provide comprehensive health care benefits to people in poverty. Ryan's plan turns the program into block grants for the states — states get a bunch of cash from the feds and have to make the best of it. For many states, that will mean severe benefit rollbacks.

Seniors, and others on Medicare, would be in a slightly different predicament. Currently seniors 65 and over are guaranteed a defined benefit program: taxpayers finance the system, and the government agrees to pay for seniors' health care services (though seniors have to pitch in too). Ryan's plan would leave that system intact for anybody currently on Medicare, or expecting to be on Medicare within 10 years. For everyone else the program would be radically overhauled. Future beneficiaries would no longer have a single payer system to rely on. Rather, they'd be given a menu of private insurance plans to pick from, and subsidies to help pay their premiums. If those premiums skyrocket, that's on them. If the insurers themselves aren't required to pay for whatever the doctor orders, then the guaranteed benefits will erode.

Recently Princeton economist Uwe Reinhardt — a respected health care expert — described the plan this way: "Under the defined contribution approach envisaged by the Rivlin-Ryan plan, most of the risk of future health-care cost increases would be shifted onto the shoulders of Medicare beneficiaries. This feature makes the proposal radical."

But it's structured an awful lot like the new health care law, which means the GOP's position on health care is about to become Obamacare for seniors, but not for anybody else.

That's where the fight over this budget, and indeed the 2012 elections will be fought. Ryan's plan will also propose tax reforms that lower corporate and upper-income tax rates, while eliminating certain loopholes. The details of that part of his plan are unclear, but if they adhere to his Roadmap for America's Future, the GOP budget will propose to overhaul the tax code in a way that reduces the burden on the wealthy and increases it on the poor and middle classes.